Today’s taxpayers can venture down several different avenues to file their taxes, many of which include more DIY-friendly options that will likely lead them away from leaving the filing to a professional preparer or company. This deviation has caused an unexpected shift in the industry that has forced businesses to reevaluate the services they offer and the feasible methods of client retention that won’t cost them their practice.
The Shifting Landscape of the Tax Preparation Industry
It’s a simple matter of fact that paying taxes is a mandatory, inescapable element of life when you live in the United States of America. While this may be a heavy burden to bear as a taxpayer, it’s a lifetime’s worth of steady income and job security for professional tax preparers. So long as there are people and businesses earning money, the tax preparation industry will thrive.
However, as we plunge deeper into the digital age, the very landscape of the tax prep industry is changing for payers and preparers alike. Today’s taxpayers can venture down several different avenues to file their taxes, many of which include more DIY-friendly options that will likely lead them away from leaving the filing to a professional preparer or company. This deviation has caused an unexpected shift in the industry that has forced businesses to reevaluate the services they offer and the feasible methods of client retention that won’t cost them their practice.
In the same vein of having to keep up with the latest tax law additions, eliminations, and modifications, the modern tax preparer must stay viciously conscious of the sweeping industry changes that will inevitably trickle down into the ways in which tax preparation companies function.
How is the Tax Prep Industry Changing?
To gain a comprehensive grasp of how the industry is changing, it’s important to first understand the facts and stats behind the shift. The majority of today’s tax preparers are run as small businesses: 37% are run by a single individual and 53% are run by a workforce of fewer than ten employees.
The IRS received 155.8 million tax returns for the 2018 tax year, and of that total, 138.2 million returns were filed electronically. Of those 138.2 million e-filed returns, approximately 80.6 million were completed by a tax professional. The simple fact that over 50% of today’s e-filing taxpayers are outsourcing the heavy-lifting to tax preparers is a promising statistic, however, with increased accessibility and digital awareness, that percentage will likely drop.
Ultimately, taxpayers have three filing options come tax season:
Outsourcing to a tax preparation company or CPA
Due to the complex nature of filing taxes, few opt for paper filing, especially in favor of online or downloadable tax prep software. Where software prevails, professionals suffer. Automated tax preparation software specifically engineered to walk users through the entire filing process is the tax prep industry’s number one competitor, forcing professionals to come up with innovative ways to retain their clientele.
Within a market that’s competitive against web-based programs and free-to-file software, the race to come out on top is one that seems increasingly obscure. The reality is that the tax preparation process itself has become faster and more efficient as the digital age advances toward more user-friendly practices. more and more information is now available in digital format. So, for the everyday tax professional, how can you ensure your business triumphs through the industry’s fluctuation?
How to Stay on Top: 3 Tips to Keep your Tax Preparation Business Afloat
Though there is no one-size-fits-all answer to figuring out how to keep your tax prep business booming amid a changing industry landscape, there are a few things your business should keep in mind as you plan for the future.
Tip #1: Expand your service offerings
Any tax preparer knows that your busy season falls within the months of January through April. Once that April 15th filing deadline hits, you’ll likely find yourself first, relieved of the busy season, and second, without work. Naturally, you’ll likely work with clients who have filed extensions or forgot to file on time, but outside of the annual tax season, your productivity will plummet unless you have other viable avenues for generating revenue.
Expanding your service offerings is a genius way to extend your business beyond the single-service niche. By offering more for your clientele, you’ll be able to keep steady work and income long after tax season is finished. Outside of your regular tax filing service, you may consider implementing the following for individual and business filers:
Clients would be much more willing to work with you beyond the tax season if you were to offer attractive ancillary services that could satiate any number of their accounting needs.
Tip #2: Bolster your arsenal of technology
With the digital shift toward online tax-filing, it’s understandable why today’s tax firms have a reputation of being old fashioned. If your practice relies on outdated processes and antiquated systems, it’s likely time to invest in your arsenal of technology. Growing beyond your tried-and-true processes can be an intimidating move, but updating and upgrading your tech can launch productivity levels through the roof, allowing you to better optimize your money, time, and efforts.
There are a vast array of choices your tax business can choose from when shopping around for smart tax software. There are programs out there specifically designed to do everything from streamlining the number-entry process to tracking client accounts and calendars. Working smarter begins with reassessing the ways in which you integrate technology into your everyday business processes.
Tip #3: Deliver amazing customer service to anyone that contacts your tax firm
The tax preparation industry is flooded with competition, and with so many people and companies offering the same services, it’s important to focus on the things that make your business stand out. This is especially true when the heat of the tax season burns hottest. Separate your business from the rest by offering stellar customer service.
According to an American Express Customer Service Barometer study, 7 out of 10 American consumers felt comfortable spending more money to do business with a company that delivers star-studded customer service. Caring for your clientele goes a long way and works in your favor when it comes to client retention.
It’s important to keep in mind that your clients are the lifeblood of your company’s profitability, so it pays to invest in them as much as they have invested in you.